Businesses compete with each other and operate in hopes of making a profit. In the process they do 3 things. What are they?

they give the public goods and services that the public wants

they provide jobs

they distribute the nation's scarce resources

In the process, 3 economic choices of WHAT, HOW, and WHOM to produce are made jointly by whom?

businesses and consumers

The government doesn't direct the overall decision-making mechanism in the economy. What role does it play?

protector and regulator in the process

What does laissez faire literally mean?

let people do as they choose

Up until the early 1900s, what 4 areas was the role of government confines to?

protecting private property

enforcing contracts

settling disputes

protecting businesses against foreign goods

Most people believed that competition among businesses for the consumer's dollar would have what effect on the economy? In turn, how would firms respond?

keep the economy running smoothly/ firms would come up with new and better products at lower prices

What is meant by the term private enterprise?

people can own and run their own businesses with a limited amount of government regulation

For the most part this system worked well. What 2 events happened which caused the government to step in? What was the purpose of the government to step in?

mergers and takeovers reduced the number of firms and the amount of competition in selected markets. Some firms even gained so much power that they set prices to exploit consumers/ to promote competition and protect the rights of the individual

What is a market?

a mechanism that allows buyers and sellers to deal readily in a certain economic product

Markets may be local or even global. All markets are similar in that their economic activity has a distinct circular flow. Describe the flow in factor markets.

labor is exchanged for wages and salaries, land is provided in return for rent, money is loaned for interest or invested for a profit

When individuals receive their incomes, where do they spend it? What are these?

product markets- markets where goods and services are offered for sale by producers

Describe the circular motion of a business firm.

receive revenues in the product markets when they sell goods and services to individuals. This revenue pays for the land, labor, and capital bought in the factor markets. Then, these resources are used to manufacture additional products that are sold in the product markets.

Economists classify markets according to what? List 4 questions that might be asked. What does market structure simply mean?

1 how large are they?

2 how many suppliers are there?

3 how much competition is there between firms?

4 do they have any influence over price?

market structure- the nature and degree of competition among firms operating in the same market